The New Normal
How Client Complexity Will Shape the New Normal For Firms and Law Schools
Posted Dec 8, 2011 10:40 AM CDT
By Paul Lippe
Imagine you are Sally, the General Counsel of Acme Global Bio-Sciences, a $30 billion revenue biotech company headquartered in San Francisco, sitting in CEO Ken’s executive staff meeting a few weeks before the end of the quarter.
• Ken mentions the threat of a proxy challenge for the upcoming annual meeting; Sally explains the relevant Dodd-Frank changes.
• Ken asks Andrea, head of sales, about next year’s outlook. Andrea looks at Sally, because given adverse effects in Phase III trials for a much-touted new drug, there may be delay in the launch as they sort out possible risks.
• Chief financial officer Chris wants to know whether the litigation reserve for a mass tort defense is adequate; Sally’s not sure, because a judge in Arkansas just issued an order than Acme can’t present a defense because of possible spoliation.
• Arnold, head of business development, discusses whether to go forward with the acquisition of a generic drugmaker in Thailand. Due diligence has uncovered that the Thai minister of health is a minority stockholder, creating Foreign Corrupt Practices Act problems.
• Ken wraps up by saying that he has been invited back to Stanford Business School to give a 3-year update on his “innovation 2014 Plan” and he’s worried that Acme has lost its "innovative edge.”
You get the idea. It’s all pretty complicated, like a giant issue-spotter final, but where the goal is to eliminate issues, not discuss them. Ken, Chris, Andrea and Arnold each have zero interest in legal complexity—not because they are unethical, but because their experience is that legal rules are ambiguous, and the facts needed to support crisp legal conclusions are unclear. They are also impatient, because each operates from systems and data that describes fairly precisely what’s going on in their environment (e.g., Andrea uses Salesforce software to track her forecast, connecting thousands of salespeople around the world), whereas law often seems quite mushy. They usually only ask three questions:
• "What did we do about X before?"
• "What did Amalgamated Pharma do about Y?"
• “Skip on the ‘one hand or the other': What would you do in my position?”
In fact, Sally can’t recall a single time where she prepared a memo (or had a firm prepare a memo) summarizing the legal pros and cons of an issue and then an Acme executive decided what course of action to take and imposed that decision throughout Acme.
And guess what. It’s only going to get more complicated (Last week I mentioned an excellent report from the General Counsel Roundtable—OnRamp has a business relationship with GCR—that identifies these trends.):
• Instead of Acme’s legal issues being primarily U.S.-based, they’ll be more and more global—all of Acme’s projected growth will come from China, India, Brazil, Russia and Turkey, each of which, in nearly every way, views Acme’s legal activity quite differently.
• Dealing with California versus Tennessee or Washington versus Brussels was tough enough, but now there are even more lawmakers with strong incentives to assert different requirements against Acme, each of whom is convinced about their cultural and ethical superiority.
• Acme’s 29,000 employees in 62 countries are generating tons of information by email, cellphone, social media, etc., some of which will certainly contradict the official position that Acme takes on every matter, opening up avenues for investigation, litigation and liability.
• New competitors are emerging, so instead of being an 18 percent net profit company with a rising stock price and a reasonable margin for error, Acme is now an 11 percent net profit company with fewer resources and restive shareholders.
“So what?” you say. “Isn’t that why Sally is getting paid the big bucks?” To which the answer is “yes, but …”
Everyone else in Ken’s executive team meeting has systems, tools and processes to help them manage the complexity in their function. All the lawmakers, law schools, and the law firms in Sally’s world are really, really interested in the deep complexity and intellectual elegance of their area, but no one other than Sally and her team is focused on end-end complexity of the whole system. This is kind of ironic, because the legal system holds Acme to an end-end standard. Whether it's knowing about conflicting patents from the beginning of researching a molecule to adverse effects on patients 20 years later, to handling patient data, Acme’s legal duties are systemic and end-end.
To deal with systemic complexity, Sally has to:
•Make things simpler.
•Make things cheaper.
And when’s the last time you heard folks in law talk about making things simpler or cheaper?
Sally is left with no choice but to employ the language of business processes (which many lawyers will call “jargon”—see the excellent previous New Normal post from Roya Behnia on “agile law”), the tools of technology (that lawyers sometimes call “fads” – see another very good piece from Microsoft Corp. executive Brian Zeve on the cloud and law) and the techniques of cost reduction (which many lawyers will call “commoditization” or “unprofessional”). Not because these are perfect tools, but because they are tools the world offers for dealing with complexity and cost. Law has been reluctant to bring those tools to the table.
What Sally and her colleagues really want are law schools and law firms to help provide solutions that manage end-end complexity so Acme can be the best company it can be in a very complex world, a/k/a the New Normal.
Paul Lippe is the CEO of the Legal OnRamp, a Silicon Valley-based initiative founded in cooperation with Cisco Systems to improve legal quality and efficiency through collaboration, automation and process re-engineering.